Microsoft has been hinting towards their desire to release a portable gaming device. Considering their success with the XBOX gaming console this comes as no surprise. Microsoft currently has no presence in the handheld gaming market. They will have to compete with Nintendo DS and Sony PSP, with the next gen PSP already rumored to have the graphics capability of the original XBOX; Microsoft will certainly have their work cutout if they want to gain market share.

Microsoft executive Shane Kim recently told Kikizo that Xbox Live is the “connective tissue” that ties together all the company’s devices. It will be interesting to see how they will incorporate XBOX Live gaming into hand held version of Xbox. The idea of playing online over WiFi will definitely be appealing to consumers especially with the success of Xbox Live community on their consoles.

Since the Zune marketplace is already being tied into XBOX Live, Microsoft will probably be delivering something similar onto their Hand held Gaming Device.

Another thing to be noted is that the ZuneHD will include Nvidia Tegra giving it exceptionally good gaming capabilities and its clear that how Microsoft utilizes this power will determine the success of their device.

Certainly some interesting technology to come, but what would you want in your Portable Xbox?